Foreign Developers Searching for Bargain Home Sites in U.S.

All of a sudden, America’s dirt is looking good to foreign home developers. The National Association of Home Builders‘ Washington, DC office confirms it is receiving queries from Japan and Australia, Canada in recent months. “For the first time since World War II, I think [foreign] people are more optimistic about the U.S. housing market than Americans,” said Stephen Melman, NAHB’s director of economic services. “Eventually, the glut will disappear and there will be a demand again.”

The Wall Street Journal reports Sekisui House Ltd., one of Japan’s largest home builders and developers, is stepping into the U.S. housing market, “an indication that land prices have fallen low enough to catch the attention of foreign investors.” Sekisui teamed up with Newland Real Estate Group LLC of San Diego to acquire nearly 500 acres outside Houston, which eventually could house more than 1,200 homes. Terms of the transaction weren’t disclosed, but local brokers said the price likely topped $10 million.

Newland Chief Executive BobMcLeod told the WSJ a Sekisui representative contacted him last autumn to discuss a potential partnership. “To have a company of that quality come in, track us down and say: ‘Now is the time to buy in the United States,’ we were pleased,” McLeod said. “Not only for ourselves, but also for the message it sent: ‘We believe in the United States, and we believe in the growth of the real-estate business.’ ” McLeod said Sekisui officials are touring housing markets nationwide with Newland, and more deals could be announced soon.

BOB MCLEOD

Once the roads and other infrastructure are in place, the joint venture will sell more than 1,200 ready-to-build land lots to home builders. The companies expect to spend the next three years plotting the development and shepherding the project through the approvals process. During the housing boom, the U.S. drew strong foreign interest. In 2006, Emaar Properties, based in Dubai, acquired California-based John Laing Homes. But such interest largely dissipated when the market crashed, dragging down home and land values by more than a third in some cases. John Laing filed for Chapter 11 bankruptcy protection last year. It is unclear how Sekisui, which said it has sold more than two million housing units, plans to succeed where so many U.S. builders and developers have failed, the WSJ reports. In a statement released in Japan, Sekisui said it “will utilize its knowledge and experience as the provider of the largest number of residential lots in Japan, within this attractive community, and to expanding its business in the U.S.” The development will be expanded with the purchase of nearly 500 acres, above, by a Newland-Sekisui venture.

Sekisui’s latest venture isn’t much of a gamble. Nearly 11,000 homes have been built on Cinco Ranch‘s 7,600 acres in Katy, TX, since its 1991 debut, and local agents said many of the homes have held their value in recent years. Cinco Ranch was the nation’s top-selling master-planned community last year, with sales volume up 14% from 2008, according to RCLCO, a real-estate advisory firm. Buyers, who dub themselves “Cincoans,” are attracted to the product and price variety, strong schools and amenities, including biking trails and lakes. The development also is near an area called the energy corridor, home to numerous companies offering higher-paying jobs. “You’ve dropped into the perfect little world,” Christi Borden, an agent with Prudential Gary Greene Realtors, told the WSJ. “It’s easy to sell because people want to live here.”